Kremlin charges two Russian-Americans with industrial espionage

Russia announced Thursday the arrest of two Russian-Americans on charges of industrial espionage. Many analysts believe the move to be part of a Kremlin effort to regain control of the Russian oil producer TNK-BP, which is owned in part by the British oil company BP. One of the arrested men works for TNK-BP.

The Washington Post reports that the announcement by Russia's Federal Security Service, successor to the Soviet Union's KGB, comes just a day after Russian investigators raided the offices of TNK-BP, a Russian oil giant owned by three Russian oligarchs and BP.

Ilya Zaslavsky, who worked for a Russian venture of the British oil giant BP, and his brother Alexander were arrested March 12, according to the Federal Security Service, known as the FSB.

The two were detained as they met with a Russian employee of a major Russian energy company in an alleged effort to procure secret material, the FSB told the Russian news media.

The service described Alexander Zaslavsky as an employee of the British Council, a culture and arts organization that is financed by the British government, but the organization said he is not and is simply a member of a British Council alumni club for graduates of British universities.

The Russian government recently forced the council to close its regional offices, saying it was operating illegally. Leading politicians, including President-elect Dmitry Medvedev, have accused the organization of being a front for spies.

RIA Novosti reports that the FSB specifically accused the Zaslavskys of "illegally gathering secret commercial information for the benefit of several foreign oil and gas companies, in order to give them advantages over Russian competitors."

The Russian authorities' attention to the Zaslavskys' ties to the British Council has further soured relations between Britain and Russia. The Guardian reports that in January, Russia closed the regional offices of the British Council in St. Petersburg and Yekaterinburg as part of the ongoing diplomatic conflict between the two nations over the murder of former KGB agent and British resident Alexander Litvinenko in 2006. But Thompson Financial reports that the Russian government said the Zaslavskys' arrests were "not connected to the present state of Russian-British relations."

Some analysts believe the arrests are tied to the Kremlin's desire to restore its control over Russia's oil wealth. Rupert Wingfield-Hayes of the BBC writes that, despite the FSB's charges of espionage, "the immediate reaction of people in the oil industry here in Moscow has not been: 'Did they do it?' but instead: 'What is the Russian government up to this time?'"

As one oil industry analyst put it to me: "In Russia all geological information regarding oil and minerals is still classified as a state secret. Sending any such information out of Russia, even for the purposes of a financial audit, could be considered illegal."

In other words it would not be difficult for the Russian security services to come up with evidence of wrongdoing if they really wanted to.

But why would they want to?

Perhaps because someone in the Russian government wants to put pressure on someone in the Anglo-Russian oil giant TNK-BP.

An FSB statement said that the raids on the offices of TNK-BP and BP were launched in connection with the Zaslavskys' arrests, according to Agence France-Presse. Industrial espionage in Russia carries a punishment of up to two years in prison, according to the report.

"During the raids, material proof confirming the industrial espionage was found and confiscated" including classified official documents and "business cards of employees of foreign military agencies and the CIA," [the statement] continued.

Russian newspapers said Wednesday's raids on BP and TNK-BP could be part of a wider effort to force a sale of part of the joint venture, a potential deal which has been rumoured for months.

The International Herald Tribune writes that the TNK-BP, the third-largest oil company in Russia, has become a focal point for the Kremlin.

It is the only major Russian oil company with partial foreign control, other than a production sharing agreement including Exxon Mobil on Sakhalin Island. TNK-BP was formed in 2003 with the blessings of President Vladimir Putin and Tony Blair, then the British prime minister, who attended the signing ceremony. Since then, as oil prices have risen far beyond expectations, Putin's government has attempted to unwind such deals as unfavorable to Russia.

The venture, though, has been a great success for the British oil major and accounts for about a quarter of the company's total worldwide production. It is a focus of attention by Tony Hayward, BP's chief executive; any unwinding of TNK-BP could be devastating to BP.

The joint venture, though, was under pressure to sell a large Siberian gas field to Gazprom. It had agreed to a deal but never closed on it.

Also, the Kremlin may be maneuvering to buy out BP's partners from the company..., analysts have suggested, though the partners say they are not selling.

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